Nairobi News


Why government plans to withdraw fuel subsidies

The National Treasury Cabinet Secretary Ukuru Yatani has said that fuel subsidies are inefficient and often lead to misallocation of resources.

The CS, in his statement regarding the latest fuel prices review in the country by the Energy and Petroleum Regulatory Authority (Epra), said that scenario analysis suggests that fuel prices could increase further.

“The cost of the fuel subsidy could eventually surpass its allocation in the National Budget, thus potentially escalating public debts to unsustainable levels and disrupting the government’s plans to reduce the rate of debt accumulation,” Yatani said.

“For this reason, a gradual adjustment in domestic fuel prices will be necessary in order to progressively eliminate the need for the fuel subsidy, possibly within the next financial year,” he added.

According to Yatani, the move will create fiscal space for the government to necessary support targeted public spending on productive sectors that support the most vulnerable.

He said that the government has so far allocated more than Sh100 billion in the Financial Years 2021/2022, and 2022/2023 to subsidize fuel prices.

This after Epra on Tuesday announced that for the next one month, a litre of super petrol in Nairobi will cost Sh159.12, diesel Sh140, and kerosene Sh127.94, which is a record high in fuel prices.

Epra said the government will utilise the Petroleum Development Fund (PDL) to cushion consumers from the otherwise high prices.

The authority said that the government will utilise the Petroleum Development Fund (PDL) to cushion consumers from otherwise high prices.

During this year’s Labour Day celebrations, President Uhuru Kenyatta said that the country’s fuel subsidy programme had ensured that Kenya maintained among the lowest pump prices in the world.